Increasing Competition and the Winner's Curse: Evidence from Procurement

Han Hong and Matthew Shum ()

The Review of Economic Studies, 2002, vol. 69, issue 4, 871-898

Abstract: We assess empirically the effects of the winner's curse which, in common-value auctions, counsels more conservative bidding as the number of competitors increases. First, we construct an econometric model of an auction in which bidders' preferences have both common- and private-value components, and propose a new monotone quantile approach which facilitates estimation of this model. Second, we estimate the model using bids from procurement auctions held by the State of New Jersey. For a large subset of these auctions, we find that median procurement costs rise as competition intensifies. In this setting, then, asymmetric information overturns the common economic wisdom that more competition is always desirable. Copyright 2002, Wiley-Blackwell.

Date: 2002
References: Add references at CitEc
Citations: View citations in EconPapers (114)

Downloads: (external link)
http://hdl.handle.net/10.1111/1467-937X.00229 (application/pdf)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Increasing Competition and the Winner's Curse: Evidence from Procurement (2001)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:oup:restud:v:69:y:2002:i:4:p:871-898

Access Statistics for this article

The Review of Economic Studies is currently edited by Thomas Chaney, Xavier d’Haultfoeuille, Andrea Galeotti, Bård Harstad, Nir Jaimovich, Katrine Loken, Elias Papaioannou, Vincent Sterk and Noam Yuchtman

More articles in The Review of Economic Studies from Review of Economic Studies Ltd
Bibliographic data for series maintained by Oxford University Press ().